TaxTMI 
TaxTMI 
2008 (7) TMI 1046
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....ulation 44 of the Company Law Board Regulations. 1991 for stay of all further proceedings before the Company Law Board, until disposal of the civil suits in C.S. No. 943/2002 and C.S. No. 36/2003 on the file of the High Court of Judicature at Madras. 2. Shri. C. Harikrishnan. learned Senior Counsel, in support of the stay application submitted: * S. Selvarathinam. since deceased, father of the second respondent, incorporated the first respondent Company in August 2002. out of his own funds with an authorized capital of Rs. two crores divided into 20 lakhs equity shares of Rs. 10/-. along with his brothers, being the petitioners herein, as signatories to the Memorandum of Association, each agreeing to subscribe for 50000 shares of Rs. 10/- each in the capital of the Company. While the brothers were named as the first directors. Selvarathinam was the first Managing Director of the Company. In due course of time, serious disputes arose among the brothers, soon after incorporation of the Company in regard to several of the jointly run businesses and the properties owned by them -movable and immovable - which resulted into a Memorandum of Understanding (MOU) dated 18.09.2002....
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....er the Company and the properties at Sriperambudur. The High Court has to decide whether the petitioners have relinquished their rights over the shares in the Company. The averments contained in the present petition make innumerable references to the various facts and disputes revolving the MOU. which have been raised in the civil suits before the High Court of Madras. If the present proceedings are continued, there would be possibility of conflicting decisions, adversely affecting the interests of the respondents and therefore, the present proceedings shall be stayed till the disposal of C.S. No. 943 of 2002 and C.S. No. 36 of 2003. as held by this Board in (a) Rashmi Seth v. Chemon (India) Pvt.Ltd. and Ors. 1995 (Vol.82) CC 563; and (b)Mrunalini Devi Puar and Anr. v. Gakewad Investment Corporation Pvt. Ltd. and Ors. 1995 (Vol.82) CC 899. 3. Sri Arvind P. Datar. learned Senior Counsel opposed the application on the following among other grounds: * The pleadings are complete in the main petition. The respondents have failed to seek in the counter filed by them for stay of the CLB proceedings. Any objection as to stay of the proceedings ought to have been raised at the f....
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....ned. The main grievances of the petitioners raised in the company petition before the CLB are- * The Company failed to hold any board meetings or file balance sheet or annual return since its incorporation namely. 21-08-2002 in violation of the statutory provisions of the Act. * The respondent Nos. 2 & 3 have not been appointed as additional directors with effect from 10-09.2002. as disclosed in Form No. 32 dated 10.09.2002. * The petitioners have never resigned from the office of director with effect from 17.09.2002, as borne out by form No. 32 dated 18.09.2002. * The board of directors never allotted 22,570 shares on 10.09.2002. out of which 21.550 shares reportedly allotted to Selvarathinam, in terms of Form No. 2 dated 15.09.2002. * Form No. 32 and Form No. 2 stated supra have been filed after a delay of almost one year with the ulterior intention of usurping control over the Company. * In C.S. No. 943 of 2002 on the file of the High Court of Madras, the essential plea of Selvarathinam has been that the petitioners herein and Selvarathinam entered into a family arrangement reduced in the form of agreement dated 18.09.2002. by whic....
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....a nutshell, while the allotment of shares to Selvarathinam and others, appointment of the respondent Nos. 2 & 3 as additional directors and exclusion of the petitioners from the office of director of the Company are being challenged before the CLB in the company petition, the issue whether the Company will go to the exclusive control of Selvarathinam is being adjudicated in the civil suits. The High Court, in my considered view, will not go into the validity of the allotment of impugned shares; the appointment of additional directors: the alleged illegal exclusion of the petitioners from the office of director. Thus, the matters in issue in the company petition are not common but entirely different from the issues involved in C.S. No. 943 of 2002 and C.S. No. 36 of 2003. There is no identity of the subject matter before the CLB and the High Court and none of the contentious issues raised in the company petition has been agitated before the High Court, which are essential requisites before grant of slay as held in RDF Power Projects Ltd. and Ors. v. M. Muralikrishnu (supra). Therefore, there is no scope and feasibility for the High Court to go into the contentious issues agitated be....